Infosys to chart new innovation & research path

SummaryAfter its surprising recovery in the third quarter, Infosys is now looking to acquire additional muscle with regard to intellectual property and wants to focus more on research even as it wants to differentiate itself from the competition.

After its surprising recovery in the third quarter, Infosys is now looking to acquire additional muscle with regard to intellectual property and wants to focus more on research even as it wants to differentiate itself from the competition. The information technology major’s executive co-chairman Kris Gopalakrishnan believes that if Indian software companies have to start charging a premium, then development of intellectual property (IP) is critical. Infosys Labs, its research and development wing, will develop over the next few years a host of IP-based products that will help the company achieve its next level of transformation.

Gopalakrishnan, in an exclusive chat with FE, said the initiative will provide Infosys with the kind of momentum that can its sustain growth over the long term. “IP that you own will soon be the key differentiator in IT,” he said. “One of the issues in India is that no one is doing basic research work.”

That kind of focus on products has begun to bear fruit at Infosys. In the previous quarter, the company won 14 deals in the products and platforms space, adding $117 million to the total contract value of $600 million. Infosys is planning to invest more into the activities of its lab to further speed up IP design and development. The firm is also scouting for potential acquisitions in this space.

According to Gopalakrishnan, Infosys is at a stage where innovation is not just a good-to-have buzzword. It is a key discussion point whenever the think tank gets together in the board room. Already, the company is working on mobility and cloud alongside its customers.

With the world becoming increasingly value conscious, IT firms have started to focus on IP-related work, thereby bringing to the table innovative solutions that the client can deploy on a day to day basis. Business transformation is what customers want IT vendors to deliver today.

The traditional outsourcing model — which served the Indian IT industry extremely well for over two decades — is now being left behind by most players. Creating IP-based products in association with clients is something that is now being actively worked out. This will enable companies like Infosys to make use of the IP once the exclusivity clause goes out of the window, and the client too is happy as the cost of development will be split.

The traditional high-volume, low-margin services play has started to wear out the industry’s profit margins and is no longer sustainable. Gopalakrishnan believes a start has to be made now with regard to basic research. Things have to be worked out from ground up. “Emerging economies of the world are adopting cloud faster than others. Our aim is to derive 20% of the revenues outside the US and Europe. Who knows, that percentage may go up. We are clear about the fact that Infosys will go to the next level on the basis of the quality of its research. The company already has a time-tested product like banking software Finacle which is world-class. The attempt is create more such products and take the game to the next rung,” he said.